The Central Bank of Nigeria (CBN) is preparing to remove 220 billion naira from the financial system in its next Treasury bill auction. This measure should lead to higher interest rates on the money market.

The CBN announced this week its bimonthly treasury bill auction, offering 220 billion naira, despite the expected inflow of 258.63 billion naira in treasury bills due next week. The mismatch between maturities and new issues reflects a clear tightening of monetary policy by the central bank, which seeks to manage the system's excess liquidity. The cash raising operation aims to curb inflationary pressures and support the naira, but it could lead to higher borrowing costs for businesses and consumers

According to a Lagos-based bond analyst, “CBN's action is part of its broader monetary tightening program. If it helps to curb inflation, it will also lead to higher interest rates, which could dampen credit growth in the short term